Duffy Bill Addresses Puerto Rico Debt Crisis; Shields Americans from a Taxpayer Bailout
“This bill empowers the Government of Puerto Rico with the choice to partner with the Federal Government and put the island on a path towards balanced budgets and a return to fiscal security. If Congress does not act, it would have a devastating effect on the people of Puerto Rico and countless Americans throughout the states who stand to lose billions in the bond markets.
He continued, “This is a multi-pronged approach and a long-term solution. It cannot happen without adoption of legislation by the Puerto Rico Legislative Assembly which must be signed by the Governor. We know bailouts do not change spending habits. We need all sides to be fully committed to changing the way Puerto Rico manages its budgets, tax collection and finances.”
Puerto Rico’s Choice
Respecting the democratic process and the political leadership elected by the people of Puerto Rico, the Puerto Rico Financial Stability and Debt Restructuring Choice Act gives the island’s leadership a choice: through the adoption of legislation passed by the Assembly and signed by the Governor, the Government of Puerto Rico will have access the same chapter 9 bankruptcy process that America’s States do if it also agrees to an independent Financial Stability Council to oversee the island’s path toward balanced budgets and a return to financial stability.
Prior to the 1980s, Puerto Rico was treated like a state for the purposes of allowing its municipalities and political subdivisions to access the bankruptcy courts. After a rewrite of the bankruptcy code, Puerto Rico lost access to chapter 9. The Puerto Rico Financial Stability and Debt Restructuring Choice Act will restore Puerto Rico’s access to an orderly debt restructuring process, without which the result would be disorderly litigation which is neither good for the island or its bondholders.
Puerto Rico Financial Stability Council
In order to restore investor confidence and improve tax collection and budgeting practices, the Government of Puerto Rico may choose to accept the establishment of a 5-member Financial Stability Council with the authority to oversee the island’s financial planning and annual budgets. Unlike the D.C. Control Board of the 1990s, this Council will not be imposed on Puerto Rico – the island’s elected leaders in San Juan must agree to accept the Council. The Council’s duration will also be limited and it will not have the blanket authority to impose changes to Puerto Rico’s government. Rather, the Financial Stability Council will focus on just that: restoring financial stability to Puerto Rico.
Read the full text of Rep. Duffy's bill here.